The Employment Situation for May 2023

Editor's Note: This report is based on survey data from April 2023 that was published in May 2023. This is the most recent data available. (Source: Bureau of Labor Statistics)

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Just 3 months after a new record for lowest unemployment rate in the last 50 years was set in January of 2023, which registered a rate of 3.4% for the first time since the late 1960s, that rate of 3.4% has once again been achieved - this time on the shoulders of much slower job growth.

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To be clear, job growth did continue in a positive direction with the addition of 253 thousand new jobs, outpacing the 236 thousand new jobs added the month before, but down from the 311 and 517 thousand jobs clocked in February and January, respectively.

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Further, the number of people who had been without a job for less than 5 weeks dropped by about 400 thousand to under 1.9 million. The number of long-term unemployed people, on the other hand, essentially held steady at about 1.2 million, which is about one-fifth of the total unemployed population in the US.

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The number of people attempting to re-enter the workforce after at least 1 month hiatus from looking for jobs increased by almost 350 thousand to hit 5.3 million, as well.

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In terms of how the new job additions were distributed across the economy, the professional and business services industry saw the largest increase in its employment ranks, adding about 43 thousand jobs, which nearly doubles the 25 thousand new jobs this industry added on average over the past 6 months.

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Healthcare saw comparable gains with about 40 thousand newly added jobs, which is just a little down from the 47 thousand new jobs averaged over the last half year, while leisure and hospitality - which has been topping the list of industries with the most new job additions for many months - added only 31 thousand employees to their ranks, down substantially from the 76 thousand new jobs averaged over the 6 months prior.

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The social assistance, financial activities, and government sectors each added about 24 thousand positions, while mining, coal, and gas extraction added about 6 thousand, and the remaining industries were essentially unchanged from the month before.

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Average hourly earnings grew by half a point (or 16 cents) to $33.36 an hour, while the average work week held steady at just under 35 hours per week.

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Mployer Advisor’s Take

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While the 253 thousand new payroll entries added as of this latest report have at least temporarily halted and reversed the downward trend that had defined this current calendar year up to this point in the wake of January’s uncharacteristically strong performance, this outcome is close to the opposite of what the Federal Reserve is looking for here in its continuing efforts to tamp down inflation.

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Even though inflation has been dropping dramatically, with CPI inflation now at 5% - the lowest level seen in the last two years - the Federal Reserve nonetheless raised interest rates by another quarter point to 5.25% last week, which is the first time that rates have climbed over 5% since 2007.

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That said, in a statement following their latest rate-hiking meeting - the 10th such meeting in the last 13 months - Fed governors removed language that had adorned similar statements in the past that had indicated future hikes were forthcoming. As a result, many observers have concluded that we may be nearing a hiatus if not an end altogether to these rate hikes for the foreseeable future, especially in light of last week’s 3rd major bank failure in the last 2 months.

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It remains to be seen whether or not this latest unemployment report may give the Fed pause with regard to the implied pause in interest rate increases, but even with a historically low unemployment rate, the Fed’s interest rate hikes up to this point are slowly having their intended effect.

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For example, job openings have clearly slowed with about 9.6 million current job openings, which is down almost 2.5 million from about 12 million a year ago.

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When aiming for a soft landing among non-ideal and in some cases unpredictable environmental conditions, there are bound to be some ups and downs, but overall the trajectory will likely continue heading downward more often than not. How steep or shallow that descent will be over the next year remains one of the most significant unknowns.

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Abbey Dean

— Written By